­“I do think this sets up… an environment in which symbolically, politically and economically the United States’ leadership of the global economy has another kind of strike against it,” he told RT. “It does reduce people’s confidence… People get scared, they run away from riskier assets.

“I think the bigger risk is to the mortgage market, with the very fragile situation in US housing, as well as student loans, car loans, credit conditions generally,” he added. “And I would remind people, too, that S&P didn’t just downgrade the United States, they put us on further downgrade watch, so they are suggesting that this downgrade may be the beginning of a process and not the end.”

The analyst pointed out that on top of the poor shape of the US dollar, there is no other currency presently positioned to substitute for it.

“The euro, normally mentioned as a possible replacement, is in a shape that makes the dollar situation look pretty good right now,” Wolff stated. “So, clearly, that doesn’t look likely. But you may see regional currencies emerge, with euros, and rubles, and renminbi, and yen, and even the Brazilian real taking up some of the positions that the dollar historically had in their respective world regions.”

Eventually, Wolff concluded, a basket of currencies, along with some gold, may become a temporary substitute for the position occupied by the US dollar since World War II.